Rural Voters Benefit from Fee and Dividend

Rural Voters Benefit from Fee and Dividend Laser Talk

It is true that rural Americans use more fossil fuels than urban dwellers, but suburban dwellers use more than both [1]. However, just as previous studies have found [2, 3], geography doesn’t matter all that much for the impact of a carbon tax. Rather, the strongest correlation is not between carbon emissions and where you live, but between carbon emissions and how much money you make. Suburbanites tend to be richer.

This becomes more apparent when you realize that only about 36% of the average American’s fossil fuel use is from direct emissions (i.e. turning on the lights and filling the tank). 64% of our fossil fuel consumption comes from indirect use. That is, it’s embedded in in the products we buy. In other words, nearly 2 out of every 3 times we’re making a climate-relevant decision, we don’t even know it! This also explains why wealth is so closely tied to carbon emissions: wealthier Americans can afford to buy more stuff.

Emissions by zip

Figure 3 from the CGD report. In this map, white indicates average emission, blue indicates below average emissions, and red indicates above average emissions. 

When returning 100% of the revenue raised from a fee as a monthly dividend to all households in the US on a per-captia basis, about two-thirds of households end up ahead [4]. This is because the poor are inherently more “carbon-virtuous” than the rich, because they buy fewer products with embedded carbon emissions that account for 64% of the average Americans’ carbon footprint. However, with such a dividend policy, there is no reason a carbon-conscious wealthy individual could not also adjust their decision making to earn back more from the dividend than they are spending in increased carbon costs.

Emissions by income chart

Figure 1 from the CDG study. The yearly emissions and where they come from for an average American are leftmost column. The first quintile includes the poorest 20% of Americans, whereas the 5th quintile includes the richest Americans. In this graph, the author chose to display the wealthiest 2% of Americans separately, so emissions for these individuals are not included in the 5th quintile. 

  1. Kevin Ummel. 2014. “Who Pollutes? A Household-Level Database of America’s Greenhouse Gas Footprint.” CGD Working Paper 381. Washington, DC: Center for Global Development. http://www.cgdev.org/publication/who-pollutes-household-level-database-americas-greenhouse-gas-footprint-working-paper
  2. Kevin A. Hassett, Aparna Mathur, and Gilbert E. Metcalf. “The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis”. 2009. The Energy Journal, Vol. 30, No. 2. URL: https://www.aeaweb.org/assa/2009/retrieve.php?pdfid=346
  3. Dallas Burtraw, Richard Sweeney, and Margaret Walls. “The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction” April, 2009. Resources for the Future. URL: http://www.rff.org/RFF/Documents/RFF-DP-09-17.pdf
  4. “Dividends”. The Carbon Tax Center. Last modified: Feb 12, 2015. URL: http://www.carbontax.org/issues/investingrecycling-the-revenues/dividends/